Scenario: Wang's Techno Toys
Ann Wang has been successful in the domestic market selling high-tech toy products.But facing stiff competition at home,Ann has entered international markets by direct exporting.
-From a risk perspective,which financing method is the LEAST favourable for Techno Toys' export business?
A)Documentary collection
B)Advance payment
C)Letter of credit
D)Open account

Question

Quizplus · Accepted Answer

Open account is the least favorable financing method from a risk perspective for Techno Toys' export business. With an open account, Techno Toys would ship the goods before receiving payment, and there would be no guarantee that the buyer would pay. This method exposes Techno Toys to the highest risk of non-payment. The other options such as documentary collection, advance payment, and letter of credit provide more security and reduce the risk of non-payment for Techno Toys.